Question:
Explain the following factors affecting the working capital requirements of a company:
(a) Production cycle
(b) Seasonal factors
Explain the following factors affecting the working capital requirements of a company:
(a) Production cycle
(b) Seasonal factors
(a) Production cycle
(b) Seasonal factors
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Companies with long production cycles and seasonal sales must plan their working capital well in advance.
Updated On: Jun 23, 2025
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Solution and Explanation
(a) Production Cycle: It refers to the time span between the procurement of raw materials and the completion of production. A longer production cycle means a company needs more working capital to carry the process until sales are made.
(b) Seasonal Factors: Businesses that deal in seasonal products experience fluctuations in demand throughout the year. They require higher working capital during peak seasons to stock up inventory and meet the surge in demand.
(b) Seasonal Factors: Businesses that deal in seasonal products experience fluctuations in demand throughout the year. They require higher working capital during peak seasons to stock up inventory and meet the surge in demand.
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